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Falling through the cracks: the widening gap between unemployment and benefit statistics

The implementation of Universal Credit, by combining six in- and out-of-work benefits into one, could provide a much needed refocus on groups at the edges of the labour market who need support. It is also an opportunity to provide greater practical support to people stuck at low levels of earnings.

But our analysis suggests the new regime will still miss some key groups who currently do not claim support. And with a growing share of low earners in the gap, it is vital that the new in-work conditionality being introduced via UC for people earning less than a full-time job at the wage floor (with some exceptions for carers) supports people to either achieve a sustained employment outcome or progress to a higher level of earnings.

Recommendations

The ONS should identify a proxy measure of people eligible and in need of support at the edges of the labour market – as we have done. Or at the very least the ONS should provide tools for others to do so. With the move to UC, and its coverage of such a wide range of claimants, that means identifying different groups within those claiming UC. Doing so will provide a clearer and more timely understanding of the extent to which those who need support claim it.

It is encouraging that the DWP has consulted on precisely what should be measured for UC claimants. Re-considering the content provides an opportunity for a finer grain of detail, a match to Labour Force Survey metrics and a much better idea of transitions from out of work into work. It is vital that durations of unemployment, cycling between no work and some work, and the path of those who progress into work (and then to higher levels of pay, or more hours of work) is properly understood.

Over the longer term the government should do more to explore the linking of household survey data – with more detail of an individual’s background – with administrative data. Doing so would plug the gap in information this note tries to wrestle with and provide a far better understanding of those who need support and those who do not claim.